A Simple Guide to Surety Bonds for Insurance Agents

What is a Surety Bond?

A surety bond is an agreement between three parties:

• Principal – The person or business that needs the bond (your customer).
• Surety Company – The company that issues the bond and guarantees payment.
• Obligee – The organization that requires the bond, typically a government agency.

Why Are Surety Bonds Needed?

Surety bonds protect the obligee from financial losses if the principal breaks the rules. For example, if a car dealer commits fraud, a customer can file a claim against the dealer’s surety bond to recover losses. For more information, visit Alpha Surety Bonds official site.

Surety bonds also help businesses by allowing them to meet legal requirements without setting aside large amounts of cash as collateral.

How Can Insurance Agents Get a Surety Bond?

1. Log in to your account and search for the bond type.
2. If you don’t have an account, enroll on the website.
3. Get help from the underwriting team via phone, email, or chat.

Types of Surety Bonds

• License and Permit Bonds – Required for business licensing.
• Financial Guarantee Bonds – Ensure financial obligations are met.
• Public Official Bonds – Protect against misconduct by government officials.
• Contract Bonds – Guarantee the fulfillment of construction or service contracts.
• Court Bonds – Required for legal cases.
• Fidelity Bonds – Protect against employee dishonesty.

How Are Surety Bonds Approved?

Underwriters look at these factors to decide if a customer qualifies for a bond:

• Past risk related to the bond type.
• Personal credit score.
• Business experience.
• Financial statements.
• History of claims against previous bonds.

Some bonds, like notary bonds, are issued instantly because they are low risk. Others, like performance bonds, require detailed financial checks.

Information Needed for a Surety Bond Application

• Legal name and business name (if different).
• Business address and contact details.
• Years in business.
• Owner details (name, address, Social Security number).
• For larger bonds, financial statements may be required.

Cost of a Surety Bond

The price of a bond depends on risk factors. The cost is usually 0.75% to 5% of the bond amount per year. A $20,000 bond might cost between $150 and $1,000 annually, depending on credit score and experience.

How Are Surety Bonds Filed?

The surety company provides a completed bond for filing with the obligee. Some obligees require original documents with raised seals, while others accept electronic submissions.

The bond usually includes:

• Principal’s name and address.
• Surety company’s details.
• Bond amount.
• Effective date.
• Signatures and corporate seal.

How to Avoid Claims Against a Surety Bond

Principals should follow all bond terms and conduct business ethically. Most claims occur when a principal does something dishonest or fails to meet contractual obligations. By following the rules, principals can avoid claims and maintain a good reputation.